Sonos faces record revenue decline amid changing market dynamics

In 2023, Sonos reported a 5.5 percent decline in revenue, continuing a troubling trend for the company that has faced falling sales for the second year in a row. Despite significant investments and product development, including new products released and an updated app, the company has struggled to attract new customers in a market that many analysts consider saturated. During its FY24 earnings call, it was emphasized that Sonos only managed to attract one million new users, the lowest growth in the last 5 to 10 years. While the average number of speakers per household increased slightly from 3.05 to 3.08, the decline in new user acquisition has raised questions about future profitability and potential strategies to stimulate growth. The company has begun exploring the possibility of adopting a subscription model, an approach that has worked successfully for other companies in the hardware space, such as GoPro, which saw a significant increase in its subscriber base from 160,000 to 2.56 million from 2018 to 2024. However, Sonos has not confirmed any immediate plans to implement a subscription service. Instead, the rollout of features for its newly redesigned app has raised concerns among users about usability and the possible introduction of subscription costs. Many believe that an overhaul of the app, which received mixed reactions from the community, might be an indication of future service changes. Despite assurances from Sonos that no subscription model is currently in the works, public skepticism remains. Users have expressed anxiety over potential added costs associated with the new app, especially after experiencing a decline in service satisfaction. Although the company is hopeful that its app will reach full functionality soon, they are aware of the damage caused by the criticisms it faced in 2024. The implementation of innovative and user-friendly features may be crucial for rebuilding customer trust and engagement in the ongoing competitive landscape of smart devices. As Sonos prepares to launch new products, including a rumored TV streamer, in 2025, the company is keen to focus on recovering its standing in the market. With over 20 years of operations but only six years of being publicly traded, Sonos is still a relatively young company that is learning how to adapt to market demands and user expectations. The current revenue challenges have prompted the business to consider various strategies, including diversifying its offerings and exploring subscription models, as it navigates an increasingly competitive industry landscape.